Taxation in Tennessee

Updated on Monday 25th February 2019

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Foreign investors looking for doing business in Tennessee should observe the tax requirements in this sense. For instance, it is important to know that companies with establishments in Tennessee are subject to the franchise tax and the excise tax imposed on net earnings. If you would like to know more about how you can start a business in USA, we kindly invite you to address your questions, including the ones about the taxes you need to consider for your firm, to our team of company formation agents in USA

What is the sales tax rate in Tennessee?

The standard sales tax in Tennessee is set at 7%, with the mention that a reduced one of 5% is applicable to food products available for sale purposes on the market. Municipalities in Tennessee can also collect their own sales tax, up to 0.5%, depending on the type of purchase. Feel free to ask our advisors and solicit information about the sales tax applicable in Tennessee.

What is the franchise tax rate in Tennessee?

The franchise tax for companies in Tennessee is calculated in a different way, meaning that it is imposed on whichever it’s greater from the book value of real and tangible properties held in Tennessee or the net worth of the company. In this sense, the rate of 25 cents per $100 is established, considering that there is no franchise tax less than $100. Sole traders and general partnerships established in Tennessee do not need to pay the franchise tax.

What is the excise tax rate in Tennessee?

The excise tax represents an income tax set at a rate of 6.5% which applies to the net profits of a company with establishments in Tennessee. It is good to know that sole traders and general partnerships are not subject to the above-mentioned excise tax in this state. You should bear in mind the tax regime for the type of company you wish to open in Tennessee, a matter where our team of consultants can provide support. Foreign investors who want to open a company in USA or are interested in company formation in USA should get in touch with our local advisors.

The personal income tax rate in Tennessee

A flat rate of 6% is applicable to bonds and stocks, however, wages, salaries, and other related incomes are not subject to a personal income tax in Tennessee. However, you should know that a 3% tax rate is applicable to earnings generated from interests and investment dividends in Tennessee. If you are a foreign entrepreneur who wants to set up a company in Tennessee, we kindly invite you to read the general guide to company incorporation in Tennessee and find out the main requirements in this sense. 

Taxation for LLCs in Tennessee

Limited liability companies are not treated as pass-through entities in Tennessee and are not subject to any state or federal income taxes. However, you might want to observe the following matters in terms of LLC taxation:
  1. The franchise and the excise tax are applicable to the distributed income for each member of the LLC.
  2. An individual member of an LLC does not owe state tax on whatever percentage of the company’s net revenues he/she eventually obtains.
  3. In the case the LLC is seen as a corporation, the federal corporate income tax applies.
  4. Multi-state companies will have to observe the taxes imposed in each state.

If you decide for registering a company in USA, including Tennessee, it is recommended to hire the services of an accounting firm in USA that can take care of the tax obligations in the company, among many other things. You might want to get in touch with our team and see how you can benefit from complete services besides USA company formation.

Taxation of partnerships in Tennessee

It is good to know that the revenues of general partnerships established in Tennessee are allocated to the individual members, and at that point, because there is no personal income tax, no tax is owed. Limited partnerships and limited liability partnerships are subject to both excise and franchise tax in Tennessee.   

Other tax facts in Tennessee

A property tax rate of 0.74% is applicable to those having real estate properties in Tennessee. It is important to know that engineers, accountants, lawyers, architects, and any other professionals will have to bear in mind the Tennessee professional privilege tax of $400 per year. Let us remind you that you can receive complete tax advice and even information about the legal tax minimization methods which can be implemented in your firm from our local team of accountants. 

We kindly invite you to contact our team of company formation specialists in USA and solicit complete details about the taxes you need to pay in Tennesse.